The Jewish Ethicist: Stealing Customers_

What is considered fair competition for customers?

Q. In our small community there is an established business that has served residents for years. Recently, a competing business opened and is turning to customers to persuade them to use their services instead. Is this ethical?

A. Jewish law has an extensive tradition regarding fair competition for customers. Let's examine some of the main conclusions of our tradition:

1. Other things being equal, we should strive to avoid competition that would significantly harm someone's livelihood. Usually a person devotes prolonged and careful thought before entering a line of business which shows promise of profits; why not devote an extra few hours of thought to see if you can find one which won't take away someone's current means of support?

If everyone thought this way, we would have more creative ideas for new goods and services, and less economic dislocation. But more important than the economic impact is the human element: displaying consideration for our neighbors.

Realistically, it is not always possible to make a living without treading on someone's toes. Therefore, Jewish law does not forbid competing with an existing business even if the competitor may make damaging inroads into the established firm's clientele. However, there are some principles of fair competition.

2. Jewish law sanctions constructive – not destructive – competition. Therefore, it is unethical to employ means that are intended to harm the competitor, rather than attract legitimate business. This includes predatory pricing or acting to block customers' access to the competing firm.

3. It is improper to use the competitor's efforts to his detriment. For example, it is forbidden to go into the competitor's store to solicit customers! A modern variant would be using the competitor's own customer list as a basis for solicitation.

Another example given in Jewish law is using someone's creative efforts to his detriment, for example by stealing an inventive process and the like. In our time, these issues are regulated by intellectual property law, including patents, trademarks and copyrights. These should be respected.

4. Competition should be for new business. It is usually unethical to try and convince customers to cancel their existing agreements. If customers turn to you and decide on their own initiative that they want to terminate their current agreements (in a permissible way) that's not your problem, but it's not nice to encourage people to break their agreements.

It is also appropriate to consider the scope of the impact. If a new entrant will be able to make a respectable living and the existing firm will continue to exist, there is relatively little problem. But common sense and ethical sensibilities concur that it is best not to compete if the end result will be ruinous competition leading to razor-thin profits for both the new and the old firm.

Let's apply these insights to your question. First of all, let us hope that the new entrant considered other possibilities before he decided to start trying to lure customers who are currently happy with the existing firm. The next thing to point out is that the inducements being offered to customers should involve substantive and sustainable benefits compared to the current service. Also, it would be completely unethical to get the names of potential customers from the confidential lists of the current supplier. Finally, in direct solicitation the new firm should offer to take care of the customers' new business, not encourage them to cancel their agreement with the current firm.

Jewish law recognizes that competition for customers is a valuable incentive for firms to provide better service at lower prices. But like any beneficial phenomenon, the maximum benefit from competition is when it is carried out within rational and ethical constraints.

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About the Author

Rabbi Dr. Asher Meir is Research Director at the Business Ethics Center of Jerusalem (www.besr.org). He studied at Harvard, received a PhD in Economics from MIT, and rabbinic ordination from the Israeli Chief Rabbinate. Prior to moving to Israel, he worked at the Council of Economic Advisers in the Reagan administration. Rabbi Dr. Meir is also a Senior Lecturer in Economics at the Jerusalem College of Technology and has published several articles on business, economics and Jewish law. He is the author of the two-volume, "Meaning in Mitzvot (Feldheim), and his Aish.com columns form the basis of the "Jewish Ethicist" book (ktav.com).

The opinions expressed in the comment section are the personal views of the commenters. Comments are moderated, so please keep it civil.

Visitor Comments: 2

(2)
Leah Mark,
September 16, 2003 12:00 AM

What you say is nice in theory. We are following all the ethical precepts you mention. We have done so intrinsically always. Now that we supply only to the kosher market in a small community, we see the precepts you mention broken almost everyday by so called kosher suppliers buyers competitors, you name it. I feel the only livelihood is not selling or dealing with Jews. Call me cynical but it has been our experience. Keep writing your columns . Maybe someone will listen . Leah Mark

(1)
al puglisi,
September 15, 2003 12:00 AM

thank you

As an insurance professional I am sometimes in a situation where a client I may have contacted a prospect who already has an agent. Now they may be unhappy with their current agent and want to change. I try to avoid these situations but as much of business comes from cold calling, it is a virtual impossibility. Usually if someone I have contacted informs me that they have an agent, I cut the contact short there for the very reasons you state. Is this the ethical thing to do? Or should I pursue the situation? Sometimes I wonder. Thanks for giving me something to think about.
If you can answer the questions I raise here, concerning my own situation, I would appreciate it.

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I’m wondering what happened to the House of David. After the end of the Kingdom of Judah was there any memory what happened to King David’s descendants? Is there any family today which can trace its lineage to David – and whom the Messiah might descend from?

The Aish Rabbi Replies:

Thank you for your good question. There is no question that King David’s descendants are alive today. God promised David through Nathan the Prophet that the monarchy would never depart from his family (II Samuel 7:16). The prophets likewise foretell the ultimate coming of the Messiah, descendant of David, the “branch which will extend from the trunk of Jesse,” who will restore the Davidic dynasty and Israel’s sovereignty (Isaiah 11:1, see also Jeremiah 33:15, Ezekiel 37:25).

King David’s initial dynasty came to an end with the destruction of the First Temple and the Babylonian Exile. In an earlier expulsion King Jehoiachin was exiled by Nebuchadnezzar, together with his family and several thousand of the Torah scholars and higher classes (II Kings 24:14-16). Eleven years later the Temple was destroyed. The final king of Judah, Jehoiachin’s uncle Zedekiah, was too exiled to Babylonia. He was blinded and his children were executed (II Kings 25:7).

However, Jehoiachin and his descendants did survive in exile. Babylonian cuneiform records actually attest to Jehoiachin and his family receiving food rations from the government. I Chronicles 3:17:24 likewise lists several generations of his descendants (either 9 or 15 generations, depending on the precise interpretation of the verses), which would have extended well into the Second Temple era. (One was the notable Zerubbabel, grandson of Jehoiachin, who was one of the leaders of the return to Zion and the construction the Second Temple.)

In Babylonia, the leader of the Jewish community was known as the Reish Galuta (Aramaic for “head of the exile,” called the Exilarch in English). This was a hereditary position recognized by the Babylonian government. Its bearer was generally quite wealthy and powerful, well-connected to the government and wielding much authority over Babylonian Jewry.

According to Jewish tradition, the Exilarch was a direct descendant of Jehoiachin. The Talmud (Sanhedrin 5a) understands Genesis 49:10 – Jacob’s blessing to Judah that “the staff would not be removed from Judah” – as a reference to the Exilarchs in Babylonia, “who would chastise Israel with the staff,” i.e., who exercised temporal authority over the Jewish community. It stands to reason that these descendants of Judah were descendants of David’s house, who would have naturally been the leaders of the Babylonian community, in fulfillment of God’s promise to David that authority would always rest in his descendants.

There is also a chronological work, Seder Olam Zutta (an anonymous text from the early Middle Ages), which lists 39 generations of Exilarchs beginning with Jehoiachin. One of the commentators to Chronicles, the Vilna Gaon, states that the first one was Elionai of I Chronicles 3:23.

The position of Exilarch lasted for many centuries. The Reish Galuta is mentioned quite often in the Talmud. As can be expected, some were quite learned themselves, some deferred to the rabbis for religious matters, while some, especially in the later years, fought them and their authority tooth and nail.

Exilarchs existed well into the Middle Ages, throughout the period of the early medieval scholars known as the Gaonim. The last ones known to history was Hezekiah, who was killed in 1040 by the Babylonian authorities, although he was believed to have had sons who escaped to Iberia. There are likewise later historical references to descendants of the Exilarchs, especially in northern Spain (Catelonia) and southern France (Provence).

Beyond that, there is no concrete evidence as to the whereabouts of King David’s descendants. Supposedly, the great French medieval sage Rashi (R. Shlomo Yitzchaki) traced his lineage to King David, although on a maternal line. (In addition, Rashi himself had only daughters.) The same is said of Rabbi Yehuda Loewe of Prague (the Maharal). Since Ashkenazi Jews are so interrelated, this is a tradition, however dubious today, shared by many Ashkenazi Jews.

In any event, we do not need be concerned today how the Messiah son of David will be identified. He will be a prophet, second only to Moses. God Himself will select him and appoint him to his task. And he himself, with his Divine inspiration, will resolve all other matters of Jewish lineage (Maimonides Hilchot Melachim 12:3).

Yahrtzeit of Kalonymus Z. Wissotzky, a famous Russian Jewish philanthropist who died in 1904. Wissotzky once owned the tea concession for the Czar's entire military operation. Since the Czar's soldiers numbered in the millions and tea drinking was a daily Russian custom, this concession made Wissotzky very rich. One day, Wissotzky was approached by the World Zionist Organization to begin a tea business in Israel. He laughed at this preposterous idea: the market was small, the Turkish bureaucracy was strict, and tea leaves from India were too costly to import. Jewish leaders persisted, and Wissotzky started a small tea company in Israel. After his death, the tea company passed to his heirs. Then in 1917, the communists swept to power in Russia, seizing all of the Wissotzky company's assets. The only business left in their possession was the small tea company in Israel. The family fled Russia, built the Israeli business, and today Wissotzky is a leading brand of tea in Israel, with exports to countries worldwide -- including Russia.

Building by youth may be destructive, while when elders dismantle, it is constructive (Nedarim 40a).

It seems paradoxical, but it is true. We make the most important decisions of our lives when we are young and inexperienced, and our maximum wisdom comes at an age when our lives are essentially behind us, and no decisions of great moment remain to be made.

While the solution to this mystery eludes us, the facts are evident, and we would be wise to adapt to them. When we are young and inexperienced, we can ask our elders for their opinion and then benefit from their wisdom. When their advice does not coincide with what we think is best, we would do ourselves a great service if we deferred to their counsel.

It may not be popular to champion this concept. Although we have emerged from the era of the `60s, when accepting the opinion of anyone over thirty was anathema, the attitude of dismissing older people as antiquated and obsolete has-beens who lack the omniscience of computerized intelligence still lingers on.

Those who refuse to learn from the mistakes of the past are doomed to repeat them. We would do well to swallow our youthful pride and benefit from the teachings of the school of experience.

Today I shall...

seek advice from my elders and give more serious consideration to deferring to their advice when it conflicts with my desires.

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